You ran the numbers on a BRRRR deal, bought the property, finished the rehab, and now the refinance is done. But you're staring at the settlement statement and $15,000 of your capital is still stuck in the deal. This is the part of BRRRR that doesn't get talked about on podcasts.
Most BRRRR deals don't return 100% of your money. I'd estimate that 70% of the deals I've analyzed or been involved with leave some capital behind. The question isn't whether this will happen to you. The question is whether the deal still makes sense when it does.
Why the Refinance Comes Up Short
Three things kill your capital recovery on a BRRRR: LTV limits, appraisal gaps, and renovation overruns. Sometimes all three hit you at once.
The 75% LTV Wall
Conventional lenders cap investment property cash-out refinances at 75% loan-to-value. Some go to 70% for 2-4 unit properties. According to [Fannie Mae's guidelines](https://selling-guide.fanniemae.com/sel/b2-1.3-03/cash-out-refinance-transactions), you also need to own the property for at least six months before doing a cash-out refi, and if it was listed for sale recently, you might be capped at 70% regardless.
This math creates a hard ceiling. If your all-in cost is more than 75% of ARV, you're leaving money in the deal. Period.
Here's what that looks like:
| Scenario | Purchase | Rehab | All-In | ARV | 75% LTV | Cash Out | Capital Left |
|---|---|---|---|---|---|---|---|
| Best case | $120,000 | $30,000 | $150,000 | $210,000 | $157,500 | $157,500 | $0 (actually +$7,500) |
| Typical | $130,000 | $35,000 | $165,000 | $200,000 | $150,000 | $150,000 | $15,000 |
| Rough | $140,000 | $40,000 | $180,000 | $195,000 | $146,250 | $146,250 | $33,750 |
The "best case" scenario requires your all-in to be under 72% of ARV. That's a deal with serious margin built in. Most markets don't hand those out regularly.
The Appraisal Gap
You expected $220,000 ARV based on comps. The appraiser came in at $195,000. Now your 75% LTV calculation is based on a lower number, and you're pulling out $18,750 less than planned.
Appraisers are conservative on investment properties. They're not trying to help you hit your BRRRR numbers. They're trying to protect the lender. That means:
I've seen deals where the investor put $40,000 into a kitchen and bathroom remodel, and the appraiser gave them credit for maybe $15,000 of added value because the neighborhood ceiling was $175,000.
Renovation Overruns
The third killer is predictable: you spent more than you planned. The foundation issue you didn't catch in inspection. The electrical panel that needed replacement. The contractor who disappeared mid-job and you had to pay someone else to finish.
If you budgeted $35,000 for rehab and spent $52,000, you just added $17,000 to your all-in basis. Even if the appraisal comes in exactly where you expected, you're not getting that $17,000 back.
Evaluating the Deal After the Refinance
So you've got $20,000 stuck in a deal. Is it a failure? Maybe. But probably not.
The real question is: what's your return on that $20,000?
Forget about the BRRRR marketing that promised infinite returns and recycled capital. Look at what you actually have.
Calculate Your Real Cash-on-Cash Return
The formula is simple:
> Cash-on-Cash Return = (Annual Cash Flow ÷ Capital Invested) × 100
If you have $20,000 left in the deal and it cash flows $400/month ($4,800/year), your cash-on-cash return is 24%. That's excellent. Most investors would take that all day.
If it cash flows $150/month ($1,800/year), you're at 9%. Still better than the stock market historically, but maybe not what you were hoping for.
If it cash flows $50/month ($600/year), you're at 3%. That's when you need to think hard about whether this was a mistake.
Compare to Your Alternatives
That $20,000 stuck in the deal has an opportunity cost. What else could you do with it?
I've kept money in deals that generate 15%+ cash-on-cash returns because I couldn't reliably find anything better. I've also sold properties where I had capital trapped earning 5% because the money was more useful deployed elsewhere.
A Worked Example
Let me walk through a deal I analyzed recently.
The acquisition:
The refinance:
Capital remaining: $193,500 - $164,550 = $28,950
The rental performance:
Cash-on-cash return: $3,600 ÷ $28,950 = 12.4%
Is this a good deal? I'd say yes. A 12.4% cash-on-cash return is solid. The property also has $56,250 in equity ($225,000 - $168,750), which you can access later or benefit from as you pay down the mortgage.
The investor expected to get all their money back and didn't. But they still ended up with a performing asset generating double-digit returns. That's not a failure. That's a slightly imperfect success.
What To Do When It Happens
You're staring at the numbers and you've got money stuck. Here are your options.
Option 1: Accept It and Move On
If the returns are still good (10%+ cash-on-cash), just accept that this is the deal now. The "infinite returns" BRRRR dream was always a bit of marketing anyway. You have a cash-flowing rental with equity. That's the goal.
Option 2: Raise Rents Aggressively
If you're below market rent, fix that immediately. Every $100/month in additional rent is $1,200/year, which on $20,000 of capital is an extra 6% return.
Look at what similar renovated properties are getting. If you're conservative on rent because you wanted quick occupancy, consider whether that's still the right strategy.
Option 3: Add a Unit or Income Stream
Can you finish the basement and add a legal unit? Rent a garage bay? Allow short-term rentals if the city permits? These strategies can significantly boost cash flow without additional capital investment.
Option 4: Wait and Refinance Again
If the appraisal came in low but you believe the market is appreciating, wait 12-18 months and refinance again. You'll pay closing costs twice, but if values jump 10%, that could free up the remaining capital.
I've done this twice. One time it worked and I pulled out the last $12,000. Another time values stayed flat and I wasted $3,500 in closing costs.
Option 5: Sell the Property
If the returns are genuinely bad and you don't see a path to improvement, sell. You'll capture the equity (minus transaction costs) and redeploy to something better.
This is emotionally hard because it feels like admitting failure. But holding a 4% return when you could sell, pay the realtor 6%, and still have capital for a 15% return is just bad math.
Preventing This on Future Deals
The best way to handle capital stuck in deals is to underwrite conservatively upfront.
The 70% Rule (With a Buffer)
The classic BRRRR rule says your all-in should be 70% of ARV. But that assumes:
In practice, I now underwrite to 65% of my conservative ARV estimate. That gives me a 10% buffer for things going wrong, which they usually do.
Get Multiple Contractor Bids
Renovation overruns are often preventable. Get three bids. Have a detailed scope of work. Add 15-20% contingency to whatever number you settle on.
Use Conservative ARV Comps
Don't cherry-pick the highest comp sale as your ARV. Use the average of the middle three comps. If there's a sale that seems unusually high, throw it out. Appraisers will.
Factor in Holding Costs
Every month of renovation is a month of holding costs: loan payments, utilities, insurance, property taxes. A 4-month project that turns into 7 months adds real dollars to your all-in basis.
When Leaving Money In Is Actually Fine
Here's my honest take after doing this for a while: perfect BRRRR deals are rare. Most deals leave some money behind.
The question isn't perfection. It's whether the imperfect deal still works.
A property with $25,000 of your capital generating 15% cash-on-cash, building equity through appreciation and principal paydown, and providing tax benefits through depreciation is a great asset. It's just not the "infinite returns" story.
I prefer to think of BRRRR as "capital efficient" rather than "no money down." You're recycling most of your capital, which lets you scale faster than traditional buy-and-hold. You're also forced to buy deals with built-in equity, which protects you on the downside.
But expecting to get every dollar back every time sets you up for disappointment.
Running Your Own Numbers
Before you commit to a BRRRR deal, model out the refinance scenario in detail. What happens at 75% LTV? What if the appraisal comes in 10% below your expectation? What if renovation costs 20% more than planned?
The [single family rental calculator](/tools/single-family) has a dedicated BRRRR refinance analysis that shows exactly how much capital you'll recover under different scenarios. Run the pessimistic case before you make an offer. If you can live with the worst-case scenario, you can handle whatever actually happens.
Most BRRRR deals leave money in. The good investors aren't the ones who never have this happen. They're the ones who account for it upfront and make sure the numbers still work when they do.